US STOCKS-Cantor turns bearish on U.S. equities

NEW YORK, Sept 25 (Reuters) - U.S. stocks were sharply lower
on Thursday, with the S&P 500 falling back under its 14-day
moving average, and Cantor Fitzgerald expects that weakness to
continue, saying it has turned bearish on U.S. stocks.

The firm noted a number of "divergences" that it said
pointed to market losses ahead, including a decline in market
breadth and recent underperformance in small-caps; the Russell
2000 is down 8.1 percent from a recent record, while the
S&P is down less than 2 percent.

"Divergences are like stress fractures ... at some point the
divergence reverts," the firm wrote to clients. "As we see it,"
Cantor's analysis "has resulted in the conclusion that U.S.
indices are due for at least a 5 to 7 percent correction to
start, but we believe that is likely followed by a more
significant series of corrections into 2015."

Cantor also noted low levels in the CBOE Volatility index
. At 15, the "fear index" is up significantly from a
recent low of 10.28, though it remains well below its long-term
average of 20.

"Volatility in its various forms can stay low for prolonged
periods for good reason. Those reasons are simply no longer
compelling," the firm wrote.